Boston, MA -- (ReleaseWire) -- 09/24/2012 -- BMI View: We are maintaining our 6.9% growth forecast for Indonesia's construction sector in 2012. Although construction activity in Q112 was a strong 7.8% year-on-year (y-o-y), the reversal in conducive monetary conditions for construction activity and the poor outlook for the global economy will dampen construction activity over the rest of 2012. In addition, we see a real risk that the construction sector fails to realise its long-term growth potential, as there is a growing lack of political will to carry out the regulatory reforms required to unlock private sector investment demand. Taking this into account, we have revised down construction real growth to 7.7% (from a previous forecast of 8.2%) per annum between 2012 and 2021.
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The key factors that will facilitate growth are:
- In June 2012, Malaysia's state-owned electricity utility Tenaga Nasional (TNB) signed a memorandum of understanding (MoU) with two Indonesian state-owned companies - utility PLN and coal miner Bukit Asam - to develop the necessary infrastructure to sell electricity from Sumatra to Peninsular Malaysia. Under the MoU, the three companies will develop Bukit Asam's mining sites in Peranap, construct a 1,200MW coal-fired power plant near the mining sites in Peranap and a 275kV subsea cable transmission line connecting Sumatra and Peninsular Malaysia. The three companies are developing feasibility studies for the three projects.
- In June 2012, it was announced that Indonesia's transportation ministry is planning to build and relocate 45 airports by 2022 in order to support the rapid development of the country's aviation industry, said the director general of air transportation at the transportation ministry, Herry Bakti S. Gumay. The project's first phase will see the construction of 24 new airports by 2017, with the rest to be ready by 2022. The first phase was initiated in 2011 and the construction of eight airports is already on track. At least IDR200bn (US$21.2mn) is needed to construct one airport, and the transportation ministry has allocated IDR3trn (US$318mn) for infrastructure construction over 2012.
- In July 2012, the Indonesian central government decided to finance the feasibility study for the US$13.9bn Sunda Strait bridge project - a 31km road and railway bridge that connects the two most populous islands in Indonesia, Java and Sumatra. The government had decided to carry out the feasibility because the consortium in charge of the project, Graha Banten Lampung Sejahtera, chose not to carry out the feasibility study after completing a US$60mn prefeasibility study in 2010. The feasibility study carried out by the government will cover construction, funding, legal issues, land availability and developments plans for the areas surrounding the bridge. The study is at the preparation stage, with the project scheduled to enter the construction phase in 2014 and be operational by 2025.
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